GSEs Suspend Foreclosures During the Holidays
WASHINGTON-Fannie Mae and Freddie Mac have suspended all foreclosures and evictions of homeowners during the holiday season while their servicers get up to speed on a new streamlined loan modification program.
The temporary suspension from Nov. 26 to Jan. 9 is expected to give troubled borrowers already 90 days past due on their mortgages a chance to benefit from the new streamlined approach that servicers are trying to implement by Dec. 15.
"Until the streamlined modification program is fully implemented, we felt it was in the best interest of both borrowers and Fannie Mae to take this extra step," Fannie chief executive Herb Allison said. Freddie has instructed its servicers and foreclosure attorneys to contract 6,000 borrowers with pending foreclosure sales. If the single-family property is occupied, the foreclosure sale will be halted. Fannie estimates the suspension will benefit 10,000 homeowners.
Under the streamlined approach, Fannie and Freddie can reduce the interest rate to 3%, extend the loan up to 40 years and even defer payments on part of the principal if necessary. The objective is to reduce borrowers' payments to 38% of gross income. "With this suspension, seriously delinquent borrowers may have an opportunity to avoid foreclosure and workout terms to stay in their homes," GSE regulator James Lockhart said.